The Nation




Global play with attractive dividend BCP stake cut very likely BUY


Three important issues were discussed at the analyst meeting yesterday. 1)

PTT confirmed its plan to sell the entire shares of 27.22% in BCP in order to

reduce its stake in nationwide refinery business, from six to five refineries.

Moreover, since BCP has its own-brand oil and non-oil businesses (e.g. coffee

shops and minimarts), this business restructuring of PTT will increase

competition in the industry and thus result in maximum benefits for

consumers. If PTT can sell BCP as planned, it will be able to book profit from

the share sales (net after tax) at around B4.5bn (average cost of

B14.9/share) or EPS of B1.58/share. 2) Regarding a separation of a gas

pipeline business to be under GPSC's management as a flagship for PTT's

basis utility business i.e. power plant and gas transmitting pipeline, PTT said

this issue would not have an impact on shareholders. 3) For the

postponement of the listing of GPSC and SPRC in the SET from 2Q14 to late

2014 or early 2015, PTT said it would not affect the forecast since the issue

had not been included in the first place.

- Normalized profit to stay high in 2Q14, thanks to PTTEP

We project 2Q14 normalized profit to stay high close to the previous quarter

since PTTEP's sales volume would increase after the acquisition of two

projects from Hess Corporation Thailand on April 22, 2014. The two projects

are 1) Sinphuhorm (Hess holding 35percent stake) with 100 million cubic feet a

day capacity of natural gas production and 2) Pailin (Hess holding 15%

stake) with 360 million cubic feet a day capacity of natural gas production,

which would help increase total sales volume of PTTEP by 10,000 barrels a

day. For PTTGC, the profit is projected to rebound again after all plants

resume their full-capacity operation. The refinery business would weaken

because TOP and BCP will have a planned overhaul of their refineries in

2Q14, while PTT's gas sales volume would decrease from eight-day and 15-

day maintenance shutdowns of the gas separation plant unit 6 (GSP#6) and

the ethane separation plant, respectively.

- Low P/E ratio and laggard price

2014 fair value (DCF) is B360. We reiterate to buy PTT as it still provides

18% upside and 2014 P/E ratio is low at only 8.4x, versus the regional

average of 11.5x. Dividend yield can be expected at 4-5% p.a.

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